Red states hold the edge in growth

The odds of finding a good job are significantly better in the nation's red states than in blue states, according to a new study of business and tax policies across the country released Thursday.

"Rich States, Poor States," the annual report by the American Legislative Exchange Council (ALEC), examines the latest state trends in economic growth, ranking the 50 states based on their economic prospects for 2013 as well as how they fared from 2001 to 2010.

The study's authors — economists Arthur Laffer, Stephen Moore and Jonathan Williams — conclude that the divide is expanding between pro-growth states, which tend to elect Republicans, and those with anti-growth policies, where Democrats often dominate.

"Today, we are witnessing an economic 'Balkanization' between states in America," the report from the conservative-leaning council says. "Our view is that the steady movement of human and investment capital from high-tax states to low-tax states, which has been present for decades, will continue and likely accelerate over time."

The bad news for blue states: Not one ranks in the top 10 based on overall economic outlook as gauged by 15 economic indicators, including tax rates, regulatory burden and labor policies. Eight of the top 10 slots are held by GOP-dominated red states, led by Utah, while two are politically mixed "purple" states, Florida and Virginia.

On the other hand, the list of the bottom 10 is dominated by blue states. Vermont, a solidly blue state, ranks last in terms of economic outlook, and only one red state — Montana — makes the bottom 10.

Meanwhile, by a second measure in the ALEC study, eight of the top economic performers from 2001-2010 were red states, based on three factors: gross domestic product, absolute in-migration and nonfarm payroll employment.

Bright-red Texas ranks first on economic performance, followed by purple Nevada and then a string of red states: Utah, Wyoming, North Dakota, Idaho, Arizona, Alaska and Montana. Only one blue state — Washington — appears in the top 10.

Again, the reverse is true of the bottom 10 states. Eight are blue states, while Ohio is the only purple state and Missouri is the lone red state. The worst state for past economic performance? Blue-state Michigan, although the study predicts an economic turnaround based on recent moves by Republican Gov. Rick Snyder (elected in 2010) and fiscal conservatives in the legislature.

How can a low-performing state rev up its economy? The report recommends busting up unions, reducing taxes and lightening the regulatory load — ideas not likely to find much traction in states where Democrats control the governorship and legislature.

"Nationally, states with low tax rates, limited government regulations and right-to-work laws were most likely to have a better economic outlook than states with high income taxes and burdensome regulations," ALEC officials said in a statement accompanying the report. "The report shows that over a 10-year period, the nine states without personal income taxes have outperformed the nine states with the highest income tax rates in population, job and revenue growth."

Not surprisingly, most of the nine states without personal income taxes are red states. The exception is Washington, which was also the only blue state to rank in the top 10 based on economic performance from 2001-2010.

The study, now in its sixth year, is also known as the ALEC-Laffer State Economic Competitiveness Index. This year's report also features a case study on California's shaky fiscal health and offers recommendations on restoring economic prosperity.

Recommendation number one: Switch from a progressive income tax to a flat tax. It's hard to envision the state's Democratic legislature adopting such a plan; then again, the report notes that California Gov. Jerry Brown advocated a flat tax when he ran for president in 1992.